Tuesday, June 1, 2010

Floor Covering Retail Sales Are On the Rise

CATALINA FLOOR COVERING STATISTICAL TRENDS AND OUTLOOK

In my April post, “Catalina Says U.S. Flooring Industry Set For Spring Thaw,” I asked readers to let us know if they  benefited from improvements in the economy that were anticipated this spring.  We received a number of positive responses that business was beginning to improve.  Well the numbers are in, and retail floor covering sales are on the rise.

The first increase in floor covering store sales in 29 months came in March this year with a boost of 6.1% over last March, according to the U.S. Department of Commerce monthly retail survey. Based on furniture and home furnishing store sales in April, we think it’s possible that in April floor covering store sales will show a 4.5% increase over the previous year.

In the home center channel, Lowe’s and Home Depot are also seeing positive trends.  Lowe’s estimates that total second quarter 2010 sales could rise by 5% to 7%, with bigger ticket home improvement purchases leading the way.  Home Depot sees sales rising in the 4% to 5% range.


Outlook for Floor Covering Sales Throughout 2010

In the second quarter of this year we estimate total floor covering retail sales may increase by 4% to 5% and similar increases will continue through the second half of the year.

Increasing Home Sales Fueling Floor Covering Sales

The recovery of floor covering retail sales is tied directly to the increase in existing home sales which reached its highest level in three years this April with a 26.2% surge over last April,  according to the National Association of Realtors.  From April 2009 to May 2010 existing home sales increased  11.5% with over 550,000 more homes sold in that time compared to the previous twelve-months.

These sharp gains are, of course, due to the $8,000 tax credit for first time home buyers. That credit expired on contracts signed by April 30 and closed by June 30 and many are worried that existing home sales, and therefore floor covering retail sales, will decline again due to the expiration of the tax credit.

Will Floor Covering Sales Suffer with the Demise of the First-Time Home Buyers’ Tax Credit?

There are a number of positive trends that we expect will keep floor covering retail sales on an upward trend for the rest of 2010, even after the loss of the $8,000 first time home buyers’ tax credit:
 
•    The most important is the turnaround in U.S. employment.  U.S. employment rose by over 200,000 this April and is expected to remain positive.  This will give a boost to household incomes and lead to rising home improvement spending.

•    Household ability to spend is also improving.  Mortgage rates continue to remain below 5%.  This will provide a floor under existing home sales and improve the finances of those refinancing.

•    Homeowners’ ability to finance home improvements is also expected to increase with the rise in home values and a decrease in debt to income ratio.  The average value of an existing homes sold rose by 3% in March and April this year and the household debt to income ratio declined to its lowest level in nine years by the end of 2009.

As always, please let us know at the Floor Covering Institute how these positive market conditions are affecting your business.  We value your input and enjoy the conversation.  You can enter a comment below.

Stuart

Stuart Hirschhorn is a member of the Floor Covering Institute and Director of Research of Catalina Research, Inc. which provides in-depth market research on the floor covering industry.

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